Stations Add Incentives and Generate Revenue

Aug 15, 2005  •  Post A Comment

To increase advertising revenue and distinguish itself from competitors, KERO-TV, the ABC affiliate in Bakersfield, Calif., recently offered an auto dealer-one of its regular spot buyers-something extra, hoping for something extra in return.

As an incentive for the dealer to buy more ad time, McGraw-Hill-owned KERO provided 300 $50 gas cards for the client to give to customers who came in for a test drive. Because of the station’s incentive program, the dealer spent more than $100,000 on a media schedule this year-more than triple what it has spent in the past.

“They’re not going to give you that much money if they’re just buying spots,” said Steve McEvoy, KERO’s general sales manager.

From a toy in a Happy Meal to a gift with a $35 cosmetics purchase, incentives have long been a popular way to give businesses a quick shot in the arm. Now many local TV station sales departments, struggling to make their budgets and build advertiser loyalty, have begun using the gift-with-purchase idea, often with dramatically positive results.

In some cases, stations are seeing 50 percent to 80 percent increases in ad revenue with the use of incentives, according to sources at several stations. The ability to offer something different to advertisers, combined with an instant revenue influx, has local stations and ad buyers happy to get on board. Incentives such as gas cards, DVDs, electronics and trips-which advertisers in turn give away to their customers-have been consistent lures for new and repeat advertisers.

Notably, KERO was more than compensated for its investment in gas cards because it was able to obtain them without spending the $15,000 cash price. Instead, the station purchased the cards with airtime. In what is becoming a popular business solution for local television stations, KERO gave blocks of airtime to a media agency that arranges barter deals between stations and merchandisers.

“The question is what does a local TV station bring to the party?” said Pat Pattison, a founding partner of Incentive Plus Network, a 2-year-old private company that provides merchandise and market-tailored incentive plans for local stations that want to increase ad revenue. “If [advertisers] were thinking of newspaper or radio or four other TV stations, we get them to deal with our clients.”

Mr. Pattison, a promotional merchandising veteran, started IPN in 2003 with Henry Urick, a former VP of marketing at Tribune Entertainment. Their Castaic, Calif.-based company is among the first to bring the gift-with-purchase option to local stations, creating a new niche in the $16 billion promotional products industry.

Create Some Buzz

While national ad campaigns are often oriented toward building brand awareness, local advertisers such as auto dealerships, restaurants and furniture stores are looking for more immediate results. Figuring out what a certain slot of airtime is worth based on ratings and cost per point can be a convoluted process, said Steve Ference, a senior manager for Apex Media, the agency that brokers the deals between IPN and its client stations. “It’s a tremendous leg up [for stations] to offer something unique to advertisers who buy a media schedule with them,” he said.

Since its inception, more than 80 stations have signed up with IPN for various promotional merchandise packages, with incentives for advertisers making up nearly 50 percent of its business. (IPN also provides merchandise for on-air promotions held by the station, client gifts and sales team incentives.) “The program is designed so that the station can actually take the promotion and the merchandise to the advertiser,” Mr. Pattison said. “If someone responds, they know it was driven by the station’s advertising.”

In the past year IPN has helmed a variety of merchandise deals. One station provided its local HoneyBaked Ham outlet with Christmas-themed DVDs to give away with purchases. Another station bought home theater equipment, which it included in a furniture store’s ad package.

From California to New York to Louisiana, gas cards are hugely attractive incentives. With an incentive program, stations can offer advertisers $1,000 in gas cards to go with a $10,000 purchase of 30-second and 10-second commercial spots.

“Not too many years ago, the main source of revenue was what you could get by selling. Now it’s what can we get from the value-added,” said Richard Livesey, general sales manager for Nexstar Broadcasting-owned CBS affiliate WCIA-TV in Champaign, Ill. “If [the advertisers] get results with their airtime buy, it’s win-win.”

“In a smaller market, you’ve got to be focused on moving product,” said Michael Nurse, general sales manager of Granite Broadcasting-owned ABC affiliate WKBW-TV in Buffalo, N.Y. “We ultimately make our investment [in merchandise] back. It’s a critical way of differentiating yourself from the competition. Loyalty is flexible, and you hope to create some buzz.”

Timing Important

With automotive dealers making up a significant portion of local advertising, the gas cards have been particularly successful items. At Pollack/Belz Communications-owned ABC affiliate KLAX-TV in Alexandria, La., a Honda ATV dealer nearly doubled its ad budget in April when it was offered gas cards, which were offered to customers who purchased a certain model of vehicle. It was “real effective,” said Carol Ulmer, general sales manager of KLAX. “It’s not just a spot schedule. They could actually see someone coming into their dealership. We were in a horrible gas crisis and they were trying to sell their motorcycles, so it was a perfect solution.”

KLAX is also offering a complimentary full-page ad in the station’s Christmas mailer to repeat advertisers who spend more than they did last year. “You have to go out with not just so many spots for so much money,” Ms. Ulmer said.

Timing plays a large role in how much stations offer and when. KLAX is planning to focus on sweeps weeks. WKBW also is targeting sweeps. The sales department thinks using incentives on a quarterly basis is the right idea. KERO tries to stagger its promotions.

“It’s risky, making a promotion-of-the-week,” Mr. Nurse said. “Don’t overexpose. … And you have to analyze if you’re truly getting new or extra revenue.”